Opines Miller Tabak’s Andrew Wilkinson: “The unveiling of Kuroda’s brave stance was quite a revelation to investors across all asset classes and comes at a time when they are concerned that markets remain buoyant only at the hands of central bankers’ witchcraft.”

But if FactSet’s figures are correct, investors buying the popular WisdomTree Japan Hedged Equity fund (DXJ) right now are paying a huge premium versus the underlying portfolio.

Yuriko Nakao/Bloomberg

There’s a large gap between this ETF’s intraday indicative value and its market price. The IV is the pricing measure updated every 15 seconds intended to give you a sense of the “real” value of an asset (to the extent this is even possible), versus the price the market is demanding at the moment. The gap reflects the premium market makers and others are receiving in order to meet investors’ extreme buying demand. (The reverse also happens — ETFs will move to a discount when opinion sours.)

The WisdomTree fund’s market value is soaring 7.4% Thursday, to $43.81. The IV is up by an enthusiastic-but-not-so-heady 2.7%, according to FactSet. Is it really worth your while to pay an extra 5% to buy today?

You see the same pattern iniShares MSCI Japan Index Fund (EWJ), whose market price is ahead by 3.7%. This fund’s IIV appears to be down by 0.7%. Blame the slump in the yen for this unhedged fund’s IIV drop. The dollar has surged 3.6% today versus Japan’s currency.Maxis Nikkei 225 Index Fund (NKY), up 2.9%, is also a contrast to the IIV (off 0.6%).

Take the long view and maybe you’re more willing to pay up. Fund shop International Value Advisers last week was making arguments in this vein, on the basis of Japanese stock valuations. “[T]he game changer for us at IVA as investors in Japan is not the new Prime Minister and his policies, but rather the growing evidence that capital allocation (increased dividends and share buybacks) is improving among companies there and valuations remain attractive,” the firm wrote.

From their March commentary:

While we think it will take some time for Japanese companies to stop hoarding cash, we think capital allocation is slowly changing for the better and fortunately a few companies we own are good examples. The best capital allocator among our Japanese holdings is Astellas Pharma (ALPMY) (health care), which is the second largest drug maker in Japan. It bought back 19% of shares outstanding from 2005-2010, and in December 2012 they announced a buyback program and have bought back 2.3% of shares outstanding since then. Management told us we may expect buybacks to continue since the company has digested its acquisition of OSI Pharmaceuticals (and they did not overpay!) and its net cash is around 16% of market cap today. Additionally, the stock’s dividend yield is currently 2.6% with a payout ratio close to 50%.

There are doubters that today’s Bank of Japan news is as big as it seems. Wells Fargo’s Brian Jacobsen is one. “If a chicken puffs up its feathers, it might look bigger,” he writes clients this morning. “[B]ut it’s still a chicken.” From Jacobsen:

A lot of the growth in the monetary base the BOJ is projecting is from the Loan Support Program. That’s like the “funding for lending” program of the Bank of England and a lot like the Federal Reserve’s ancient real bills doctrine. The only thing is, with the Loan Support Program, the loans aren’t that big. 150 billion yen per counterparty. They may need to make that program more flexible. It’s cheap funding for the banks if they make loans or investments, but it’s not like they don’t have cheap funding now. This announcement from the BOJ might not be as bold as it first appears. If a chicken puffs up its feathers, it might look bigger, but it’s still a chicken.

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